In
order to facilitate the flow of home remittances and mobilize
foreign exchange resources the following instructions are
issued.

A.
HOME REMITTANCES AT THE RATE OF
Rs. 46 = $ 1 THROUGH BANKING CHANNELS.

All
inward remittances of foreign currency under the Home Remittance
Scheme shall be payable at the rate of Rs. 46 per US Dollar
with effect from June 22, 1998. In the case of other currencies,
the amounts would be payable at the above rate crossed with
New York's closing mid rate for the previous working day.
The difference between the Authorised Dealers applicable
buying rates and the special rate at which payment is made
may be claimed by the Authorised Dealers from the respective
Chief Mangers of State Bank of Pakistan on submission of
a statement showing total currency-wise amounts, the Authorised
Dealers clean T.T. buying rate, the amount payable by them
and the amount actually paid. The same principle will also
apply to such payments made from non-resident rupee accounts
of overseas bank branches and exchange companies. In other
w3ords, payment to the beneficiaries of 'Home Remittance'
will be made at the assumed rate of Rs. 46 per U.S. dollar,
and the difference between this rate and T.T. clean buying
rate claimed from the State Bank. Detailed item-wise statements
of the differential so claimed shall be maintained by the
Authorised Dealers for inspection by the Banking Supervision
Department. The State Bank will carryout a random check
to ensure that the foreign branches of the Authorised Dealers
receive and transfer home remittances promptly and efficiently.
Any negligence or delay will invite strong action by the
State Bank of Pakistan.

B.
NEW FOREIGN CURRENCY ACCOUNTS UNDER NEW RULES.

1. It has been decided to allow the opening and free operation
of new foreign currency deposit accounts by residents as
well as non-residents under new rules. Commercial Banks
holding licenses as Authorised Dealers and those Non-Bank
Financial institutions which have been given restricted
Authorised Dealers licenses for this purpose, are free to
accept foreign currency deposits (or issue certificates
of investment, as applicable) from any person (which term
includes residents as well as non-residents, Pakistani and
foreign nationals, a firm, company and other legal entities)
in any foreign currency. The NBFIs and banks accepting the
funds would not be required to surrender the same to the
State bank nor the State Bank would provide a forward cover
in respect of such accounts. The institutions accepting
such funds will be free to keep / invest the same abroad,
in addition to their usual Nostro balances or to invest
/ lend it in Pakistan. They will also be free to recover
reasonable bank charges on handling cash transactions in
foreign currencies received into or paid out of such accounts.
The balances of new foreign currency accounts will not be
required to be reported to the State Bank of Pakistan in
the statement prescribed on pages of Appendix V of the Foreign
Exchange Manual. Instruction regarding reporting for monitoring
purposes of transactions under the new scheme will be issued
separately.

2.
The Authorized Dealers will be free to decide the rate of
return that they offer to the depositors. They would also
be free to lend / invest the funds so mobilized in any manner
they like and they will also be free to cover their exchange
risk in any manner, as they would be required to maintain
a 'square' position in respect of these funds.

3.
New foreign currency accounts would be allowed by the Authorised
Dealers under the above system with effect from June 22,
1998. These instructions would also apply to all those account-holders
who have been allowed to continue to operate their foreign
currency accounts vide F.E. Circular Nos. 12 and 17 of 1998
and any subsequent amendment thereof as well as through
letters addressed by the Foreign Exchange Department to
the individual Authorised Dealers / Account-holders. Authorised
Dealers will, however, ensure that the proceeds of goods
exported form Pakistan, and payments received for services
rendered in Pakistan are not credited to such accounts.

4.
It would be permissible for the Authorised Dealers to lend
such funds to borrowers in Pakistan, subject to observance
of regulations prescribed by the Banking Policy & Regulations
Department. Before lending any money in foreign currency
to persons / firms etc. in Pakistan observance of usual
standards of prudence, including the ability of the borrower
to repay the loan, would be ensured.

5.
In the case of a loan to an exporter, it would be permissible
to adjust the foreign currency proceeds of exports in repayment
of the loan and profits / interest thereon, only if the
exporter has surrendered the full proceeds of the loan to
an Authorised Dealer against payment in rupees. In the case
of a loan against imports, the importer can obtain foreign
exchange to the extent of the C & F value of the imports,
from an Authorised Dealer, if such import and payment therefore
are covered by the ITC and foreign exchange regulations,
and use the same for repayment of the loan. The payment
of profit / interest will, however, have to be made by him
from his own resources. In the case of all other loans,
the borrower will pay profit/interest and repay the loan
from his own resources.

6.
With the coming into force to these instructions, no new
account will be opened under the old scheme nor any fresh
credit made into the existing accounts except interest /
profit and items in transit on 28th May, 1998. The existing
non-resident foreign currency accounts of overseas Pakistanis
can, however, receive fresh remittances, which can be withdrawn
in rupees at the special rate of Rs. 46 per dollar as mentioned
in F.E. Circular No. 12 of 1998. The exempted category of
account-holders may continue to operate their existing accounts
in accordance with the existing instructions or may open
new accounts in terms of this circular, if they so wish.
Forward cover will continue to be provided by the State
Bank for permitted fresh credits in the existing accounts
as well as for F.E. 45 deposits.

7.
It has been decided by the Government that the accounts
opened under this scheme will enjoy the protections available
under the Protection of Economic Reforms Act, 1992.

8.
Authorised Dealers will maintain a separate ledger for the
new accounts opened under this scheme, in order to distinguish
them from the existing foreign currency accounts.

9.
The regulations relating to CRR, SLR and capital adequacy
would also apply to these deposits. The figures of assets
and liabilities in foreign currencies would be converted
into rupees at the convened Authorised Dealers buying rate,
for the purpose of reporting in the returns prescribed under
the SBP Act and BCO. Those Authorised Dealers which do not
quote their own rates for foreign currencies, (i.e. NBFIs),
or which do not quote the rate for any particular currency,
may adopt consistently the rates quoted by another Authorised
Dealers.

C.
NATIONAL DEBT RETIREMENT PROGRAMME.

1. As already advised vide F.E. Circular No. 17 and 24 of
1998, there is no restriction on receipt of fresh deposits
under this scheme and the amounts payable under the scheme
shall continue to be paid in the respective foreign currencies
on maturity.

2.
The amount remitted under the above scheme in profit bearing
deposits can, however, be converted into rupees at the rate
of Rs. 46 per dollar (or the applicable rats for other currencies),
at any time. The restriction on encashment before two years
is hereby withdrawn of the purpose of conversion into rupees.
Such encashment will, however, be subject to the condition
that the depositor will adjust the difference of the return
already paid to him on quarterly basis at the rate mentioned
in F.E. Circular No. 2 of 1997 and the rate payable under
the foreign currency deposit scheme for the completed period
on quarterly basis for which the deposit has been held.
For instance, if a deposit under the national Debt Retirement
Programme was made in US dollar on 15th July, 1997 for five
years, on which return was payable at the rate of 9% per
annum, and it is encashed on 17th June, 1998 (i.e. after
completion of three quarters), the deposit would deem to
have earned return at the rate payable on a six months deposit
under the FCA Scheme, which was 6.3438 per annum. The difference
between the amount of return already paid and the revised
amount admissible would be deducted from the principal amount
before allowing encashment.

3.
The deposits received as Qarz-e-Hasna and those received
for investment in return bearing account can, on maturity,
be rolled over at the request of the depositors. It is also
permissible to change the maturity of a deposit from a lower
initial period to a longer period. Such elongation of maturates
would entitle the depositor to receive the higher applicable
return even for the previous quarters. For instance, if
a deposit was placed in US dollar for a period of three
years at the rate of 8.00% per annum, and the maturity is
increased to five years which attracts a return at the rate
of 9% per annum, the difference of 1% would also be paid
for the earlier quarterly periods